Activation of the NF‐κB pathway requires the formation of Met1‐linked ‘linear’ ubiquitin chains on NEMO, which is catalysed by the Linear Ubiquitin Chain Assembly Complex (LUBAC) E3 consisting of HOIP, HOIL‐1L and Sharpin. Here, we show that both LUBAC catalytic activity and LUBAC specificity for linear ubiquitin chain formation are embedded within the RING‐IBR‐RING (RBR) ubiquitin ligase subunit HOIP. Linear ubiquitin chain formation by HOIP proceeds via a two‐step mechanism involving both RING and HECT E3‐type activities. RING1‐IBR catalyses the transfer of ubiquitin from the E2 onto RING2, to transiently form a HECT‐like covalent thioester intermediate. Next, the ubiquitin is transferred from HOIP onto the N‐terminus of a target ubiquitin. This transfer is facilitated by a unique region in the C‐terminus of HOIP that we termed ‘Linear ubiquitin chain Determining Domain’ (LDD), which may coordinate the acceptor ubiquitin. Consistent with this mechanism, the RING2‐LDD region was found to be important for NF‐κB activation in cellular assays. These data show how HOIP combines a general RBR ubiquitin ligase mechanism with unique, LDD‐dependent specificity for producing linear ubiquitin chains.